GERMAN investigators have broadened the sweep of a huge two year tax evasion inquiry to around 70,000 customers of some of the country's biggest banks, the newspaper Welt am Sonntag has reported.

Authorities are already investigating staff at Commerzbank and Dresdner Bank, two of Germany's big three banks, on suspicion of abetting tax evasion by helping clients to shift funds to hard to trace accounts in Luxembourg.

The newspaper quoted senior prosecutors in Frankfurt, Duesseldorf and elsewhere saying the investigation now took in some 40,000 account holders at Commerzbank and 20,000 at Dresdner, together with another 10,000 at other banks. The investigation mainly concerns small or medium sized investors who have placed their money in Luxembourg to avoid having tax deducted from their interest earnings.

The investigation, which has involved hundreds of raids on bank branches, followed the exodus of billions of marks to Luxembourg and other tax havens after Germany slapped a 30 per cent withholding tax on interest income in 1994.