The whistleblower criticised Mr Key in a first public statement released this morning, saying he "has been curiously quiet about his country's role in enabling the financial fraud Mecca that is the Cook Islands".
The Cook Islands is a former New Zealand colony but is now self-governing in "free association" with New Zealand. Investors in the Cooks pay no income tax or capital gains tax. It has been branded a tax haven.
That was the only reference to Mr Key or New Zealand in an 1800-word manifesto by the leaker, who calls himself "John Doe".
In it, he is critical of banks, financial regulators, tax authorities, the courts and legal profession.
A spokesman for the Prime Minister said the issue of the Cook Islands in relation to the Panama Papers had not been raised with Mr Key and as such he had not yet issued a response to the whistleblower's comment.
The source of millions of leaked documents from Panamanian law firm Mossack Fonseca, which outline widespread money laundering and tax evasion, sent the manifesto to German newspaper Sueddeutsche Zeitung.
The Panama Papers leak has led to increased scrutiny of New Zealand's tax-free foreign trusts, which are reported to hold hundreds of millions of dollars.
In response, Mr Key has rejected the "tax haven" tag, saying there is no secrecy about New Zealand's trusts regime.
"We have nothing to hide so at the end of the day New Zealand should have the best international practice in this area," Mr Key said last month.
The Government has commissioned an independent review of the legislation around foreign trusts which is now under way with tax expert John Shewan appointed by the Government to review New Zealand's trust laws.
The Prime Minister's spokesman told the New Zealand Herald today the Government "has always said it will consider any issues raised in relation to New Zealand's foreign trust rules and investigate whether any practical improvements could be made.
"A review of the disclosure rules around foreign trusts is already under way and the Government is participating in the OECD's ongoing work around addressing international tax issues.
"Once the Panama Papers are released in full they will be further considered."
Labour leader Andrew Little said Mr Key had tried to brush off this issue and pretend there was no problem.
"But now he and New Zealand have been singled out for allowing the mega-rich overseas to hide their ill-gotten gains and avoid paying their fair share of tax. It's very disturbing to see our country singled out as a problem in this way," Mr Little said.
New material released in the last 24 hours showed Mossack Fonseca was urging its staff to "chase the money" in New Zealand, especially following National's 2010 changes to the law, Mr Little said.
"That meant that hundreds of millions of dollars, many of them from dodgy sources, began flowing into New Zealand.
"When the mega-rich get away with not paying their fair share of tax, it means middle New Zealand has to reach further into their pockets to make up the difference. At a time when public services like health and education are under real pressure, everyone needs to be paying their fair share."
The Panama Papers cover a period over almost 40 years, from 1977 until December last year, and purport to show that some companies domiciled in tax havens were being used for suspected money laundering, arms and drug deals and tax evasion.
The source, who has never before publicly stated why he leaked the documents, said in his 1800-word manifesto that his motivation was the "scale of injustices" the papers revealed.
He welcomed the fact that the leak had triggered a debate on "wrongdoing by the elite" but said not enough action had been taken.
The man denied he was a spy or working with any government agency. "For the record, I do not work for any government or intelligence agency, directly or as a contractor, and I never have."
Others who have leaked secret and sensitive documents, such as Edward Snowden, who revealed details of the US government's mass surveillance programme, were praised in the manifesto. He also said he would be willing to co-operate with law enforcement agencies.
The source called on the European Commission, Britain, the United States and other nations to take steps to protect people who reveal private information about such sensitive issues rather than punishing them.
"Legitimate whistleblowers who expose unquestionable wrongdoing, whether insiders or outsiders, deserve immunity from government retribution, full stop," he said.
The source, who contacted the Sueddeutsche Zeitung newspaper a year ago with an offer of encrypted internal documents from Mossack Fonseca, denied being a spy but said he had recognised the "scale of injustices" described in their contents.
The source was critical of banks, financial regulators, tax authorities, the courts, and the legal profession, as well as the media, saying he had offered the documents to several major media outlets that had chosen not to cover them.
"The collective impact of these failures has been a complete erosion of ethical standards, ultimately leading to a novel system we still call capitalism, but which is tantamount to economic slavery."
The source ended the manifesto by saying "inexpensive, limitless digital storage and fast internet connections" should help digitise the revolution against income inequality.
- New Zealand Herald and AAP
