Taxation charge based on profits for the period	2000	1999	1998
	£m	£m	£m
UK corporation tax at the UK statutory rate	928	844	862
Less double taxation relief	(384)	(355)	(296)
	544	489	566
Overseas taxation	1,258	733	796
Deferred taxation	(103)	(4)	(320)
ACT write-back	–	–	(65)
	1,699	1,218	977

Reconciliation of the taxation rate	2000	1999	1998
	%	%	%
UK statutory rate of taxation	30.3	30.3	31.0
Deferred taxation not provided on fixed assets	(0.3)	(0.1)	0.1
Effect of special taxation status in manufacturing locations	(3.6)	(3.4)	(1.8)
Net cost of different rates of taxation in overseas undertakings	2.4	2.3	2.1
Share option deductions in the USA	(0.9)	(0.7)	(1.5)
Tax losses and R&D credits not previously recognised	(1.2)	(2.7)	(0.4)
Prior year items	-	(0.6)	0.4
ACT written back	-	-	(1.5)
Other differences	0.9	3.1	0.8
Taxation rate on business performance	27.3	28.2	29.2
Merger and restructuring costs	0.9	0.6	(1.8)
Taxation rate on total group results	28.2	28.8	27.4

Profits arising from manufacturing operations in Singapore, Puerto Rico and Ireland are taxed at reduced rates. The effect of this reduction in the taxation charge increased earnings per Ordinary Share by 3.6p in 2000, by 2.3p in 1999 and by 1.0p in 1998.

The integrated nature of the Group’s worldwide operations, with cross-border supply routes into numerous end-markets, gives rise to complexity and delay in negotiations with revenue authorities as to the profits that fall to be taxed in individual territories: resolution of such transfer pricing issues is an inevitable and continuing fact of life for the Group. For a number of years Glaxo Wellcome has had significant open issues relating to transfer pricing in the USA. The issues, principally relating to the success of Zantac, relate to all years from 1989 to the present and there remains a wide variation between the claims of the Internal Revenue Service and the Group’s estimation of its taxation liabilities. These issues are now the subject of discussions between the US and UK tax authorities under the terms of the double tax convention between the two countries. Having taken appropriate professional advice in seeking to manage these issues to a satisfactory conclusion, the Directors continue to believe that the Group has made adequate provision for the liabilities likely to arise from open assessments.

Save as shown in these accounts, no provision has been made for taxation which would arise on the distribution of profits retained by overseas subsidiary and associated undertakings, on the grounds that no remittance of profit retained at 31st December 2000 is required in such a way that incremental tax will arise.

Tax balances	Tax creditor	Deferred tax
	£m	£m
At 1st January 2000	(1,495)	742
Exchange adjustments	(72)	44
(Charge)/credit to profit and loss account	(1,786)	103
Credit to reserves	16	-
Cash paid	1,240	-
Other movements	(4)	-
At 31st December 2000	(2,101)	889

		Full potential			Provided
	At 31.12.00	At 31.12.99		At 31.12.00	At 31.12.99
Deferred taxation asset/(liability)	£m	£m		£m	£m
Accelerated capital allowances	(619)	(604)		(11)	(14)
Unremitted foreign investment income	-	(3)		-	(3)
Stock valuation adjustment	(64)	(70)		(64)	(70)
Intra-Group profit	314	376		44	35
Diversified Pharmaceutical Services disposal	10	29		10	29
Pensions and other post-retirement benefits	300	311		300	311
Manufacturing restructuring	55	31		55	31
Tax losses	209	211		209	211
Other timing differences	563	388		346	212
	768	669		889	742