By Peter Wilson and Sarah Robson
Inland Revenue says it proactively provides details about foreign trusts to tax authorities in other countries if it comes across "dubious activity".
It's the latest twist in the controversy that's grabbed parliament's attention since the leak of millions of documents from a Panama-based law firm.
They reveal the existence of 214,000 foreign trusts and companies set up in more than 200 countries for Mossack Fonseca's wealthy clients.
More than 11,000 foreign trusts have been set up in New Zealand and opposition parties are accusing the government of allowing the country to be used as a tax haven.
In parliament on Tuesday Prime Minister John Key rejected that, saying Inland Revenue could access detailed information on foreign trusts and was able to pass it on to other jurisdictions.
NZ Newswire asked IRD whether it proactively provided details or only provided them when they were requested.
"Where we come across any dubious activity that may impact a treaty partner's tax base as part of our regular compliance activities, we have exchanged that information proactively," a spokesman said.
Mr Key faced questions from Labour and the Greens in parliament.
"It's ridiculous to suggest New Zealand is a tax haven," he said.
"We have a strong tax treaty and information exchange network that helps discover and prevent tax avoidance through exchanging information."
Opposition parties are demanding tougher tax laws as the fallout from the massive leak continues.
New Zealand is one of the countries mentioned in the 11.5 million documents, and the papers show Malta's energy minister Konrad Mizzi and the prime minister's chief of staff, Keith Schembri, set up two offshore trusts here in 2015.
Mr Key says trustees must keep detailed financial and other records and New Zealand has always been able to comply with requests for information.
He says New Zealand doesn't tax foreigners on money earned overseas and put into trusts here.
"It's up to tax authorities around the world to enforce their own tax laws on this income and on their own residents," he said.
"We can help them do that by providing detailed information, on request, about trusts administered from New Zealand."
Labour leader Andrew Little wants an inquiry to assess the scale of the foreign trust issue in New Zealand.
"We need to know how big the problem is and then what sensible responses need to be made in order to preserve our reputation around the rest of the world," he told reporters.
Mr Key and Revenue Minister Michael Woodhouse don't think that's necessary, but say they'll consider tightening the rules if the OECD comes up with recommendations.
They say the OECD reviewed New Zealand's tax law in 2013 and gave it a clean bill of health.