The number of people sent to prison for failing to pay fines rose by 10% last year.
Some 8,304 individuals were imprisoned in 2012 for not paying court-ordered fines - up from 7,514 the year before.
New figures from the Prison Service showed this represented a large portion of the total number of people sent to jail throughout the year, which stood at 13,860.
Justice Minister Alan Shatter said it was disappointing to see so many people jailed for minor offences such as fines.
"These figures alone show that we are out of kilter with Europe and other parts of the world," he said.
"It is clear that too many offenders serve short sentences of three months or less, which is neither of benefit to the state or to victims of crime nor act as a deterrent to reoffending.
"I am strongly of the view that we need to keep the numbers of people committed to prison for the non-payment of fines to the absolute minimum. We have already legislated to require judges to take a person's financial circumstances into account when setting a fine."
Mr Shatter said he expects to publish the Fines (Amendment) Bill this term to make it easier for people to pay a fine and give the courts options to deal with those offenders.
The annual report also revealed a hike in the number of people jailed for less than three months - from 8,070 in 2011 to 8,837 last year.
The vast majority of those sent to prison throughout 2012 were male, representing 84.5% of the total 13,860.
A snapshot of the prison population last November 30 revealed there was a total 4,298 people in custody on that day.
Among them, 305 were serving life sentences, 290 were serving determinate sentences of 10 years or more, and 40 offenders were serving terms of less than three months.
Some 18 individuals were in jail for the non-payment of fines on that snapshot day.
The report also revealed a slight increase in the average cost of an available, staffed prison space in 2012 - from €65,359 the year before to €65,404.
As Mr Shatter launched the joint Irish Prison Service and Probation Service strategic plan, he said he wants greater use of community service by judges for sentences under 12 months.
"On the figures available, it is clear too many people are still being sent to prison to serve very short sentences to no public benefit at a time when the Probation Service has the capacity to take on more offenders," he said.
"This is a particular concern for me."
He revealed the Probation Service handled more than 15,000 offenders last year, including 8,790 newly sent by the courts.
The joint strategy aims to reduce reoffending and improve prisoner outcomes through seven actions.