Panama Papers NZ - United Future leader Peter Dunne says the "explosion" of foreign trusts in New Zealand should have set alarm bells ringing at the Inland Revenue Department, and he's questioning why that was never flagged with him during his eight years as Revenue Minister.

The leaked Panama Papers show the number of foreign trusts grew in the last decade from under 2000 in 2006 to more than 10,500 this year.

Graphic: RNZ / James Sanday

Mr Dunne was the Revenue Minister for a large chunk of that time, from 2005 to 2013.

"Was Inland Revenue not aware of what was going on, or did they genuinely perceive the issue to be unimportant?" he said.

"I don't recall ever receiving any advice from Inland Revenue that the foreign trust regime was potentially problematic or a vehicle for tax evasion or being used improperly.

"And I find it a little hard to believe that the explosion in numbers that occured wouldn't have raised some suspicions," Mr Dunne said.

Photo: RNZ / Alexander Robertson

He may raise those concerns with the current Minister of Revenue, Michael Woodhouse, he said.

The Panama Papers are an unprecedented leak of 11.5 million files from the database of the world's fourth biggest offshore law firm, Mossack Fonseca.

Today, RNZ, One News and investigative journalist Nicky Hager, revealed New Zealand is at the heart of a tangled web of secretive shelf companies and obscure trusts being used by foreigners to organise their private wealth, business affairs and channel their funds around the world.

The collaborative investigation also revealed Mossack Fonseca sends it clients to New Zealand for "wealth protection" and has set up an office in Auckland.

More Panama Papers coverage

Mr Dunne said New Zealand needed to do all it could to avoid the label of "tax haven" sticking to the country.

"The bottom line is that being labelled a tax haven has, in transparency and reputation terms, the same impact that an outbreak of foot and mouth disease would have on our reputation as viable primary producer," he said.

The Green Party said the government's tax review was inadequate given today's revelations which highlighted the ease of setting up secretive foreign trusts in New Zealand for the world's rich.

Last month, former PwC chairman John Shewan was appointed to conduct an inquiry into this country's foreign trust laws.

But Greens co-leader James Shaw said that would not expose the people using New Zealand as a tax haven.

"Currently we simply don't know the full extent of the problem and the papers that were released this morning give us an indication that actually it's on a really large scale," he said.

Mr Shaw said the review should be broadened urgently.

"A full inquiry needs to draw from a panel of local and international experts, with the ability for anyone with relevant information to provide input. It should include experts from IRD, the SFO (Serious Fraud Office), and Commerce Commission."

Labour party leader Andrew Little said there was no question New Zealand's reputation was being damaged.

"When we are sort of grouped now amongst the small number of countries that operate our tax system in a way that can enable the mega wealthy to avoid their tax responsibilities, that's not a club we ought to belong to," he said.

"John Key's continuing denial of the facts is adding to the damage to New Zealand. He has sided with the greedy and mega-rich on this issue from day one."

*The investigation into New Zealand links in the Panama Papers is a journalistic collaboration by reporters from RNZ News, One News and investigative journalist Nicky Hager, and with the assistance of the International Consortium of Investigative Journalists and the German newspaper Süddeutsche Zeitung.