Labour was accused of a "baseless smear" today after one of its MPs said the National Party received a $50,000 donation from BMW within weeks of the government agreeing to buy a new fleet of limos.

Trevor Mallard also said Prime Minister John Key attended a fundraising event at BMW before the contract was agreed.

It was revealed in February that the Government was selling its three-year-old fleet of BMWs and replacing them with new ones.

It bought them at a discount price and said it had negotiated a good deal.

Mr Mallard, speaking in Parliament today, said there was "at least a perception" of conflict of interest.

"If that happened in Australia, or Thailand or India, I would say it was corruption," he said.

Mr Key said BMW NZ was not the same entity as the one referred to as having made a donation to National.

"The company named in the House is an Auckland dealership -- and is not the company which the Department of Internal Affairs signed the contract with for the replacement of the VIP transport fleet," he said.

"This is not only a baseless smear on my integrity, it is also a smear on the integrity of officials in the Department of Internal Affairs who are responsible for the contract."