If there are no chemical properties like perfume or sth.,i would guess there are no probs.
But - did you test the 'moist properties' ? ^^ I'm not sure if toilet paper has the same like cotton.
I would think that the paper dryes to fast, or dissolving into the water oO.I'm pretty sure it will clear away ^^ .
But hey , test it in an empty test-tube

.... and report.
Edit : Or do you want to use it instead of a watertank?That would be to less...