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	Notes to Consolidated Financial Statements (Section 3 of 7)
	On This Page: | 6. Property, Plant and Equipment | 7. Other Deductions — Net | 8. Taxes on Income |
	6. Property, Plant and Equipment The major categories of property, plant and equipment follow: (millions of dollars) 1997 1996 1995  Land $    142 $    119 $     95  Buildings 1,682 1,597 1,406  Machinery and equipment 2,719 2,511 2,345  Furniture, fixtures and other 1,385 1,291 1,100  Construction in progress 530 487 517    6,458 6,005 5,463  Less: accumulated depreciation 2,321 2,155 1,990  Total property, plant and equipment $4,137 $3,850 $3,473  7. Other Deductions — Net Other deductions — net are summarized below: (millions of dollars) 1997 1996 1995  Interest income $(156) $(135) $(158)  Interest expense 149 170 205  Interest expense capitalized (2) (5) (13)  Net interest (income)/expense (9) 30 34  Amortization of goodwill   and other intangibles 68 66 46  Net exchange losses 28 3 14  Other, net 171 177 167    Other deductions — net $   258 $   276 $   261  8. Taxes on Income Income from continuing operations before taxes consisted of the following: (millions of dollars) 1997 1996 1995  United States $1,329 $1,065 $1,041  International 1,759 1,739 1,258  Total income from continuing  operations before taxes $3,088 $2,804 $2,299  The provision for taxes on income consisted of the following: (millions of dollars) 1997 1996 1995  United States:   Taxes currently payable:     Federal $382 $332 $341      State and local 17 54 41    Deferred income taxes (24) 10 (22)  Total U.S. tax provision 375 396 360  International:   Taxes currently payable 501 408 368    Deferred income taxes (11) 65 10  Total international tax provision 490 473 378  Total provision for taxes on income $865 $869 $738  Amounts are reflected in the above tables based on the location of the taxing authorities. As of December 31, 1997, we have not made a U.S. tax provision for approximately $939 million on approximately $4.5 billion of unremitted earnings of our international subsidiaries. These earnings are expected, for the most part, to be reinvested overseas. We operate a manufacturing subsidiary in Puerto Rico that benefits from a Puerto Rican incentive grant in effect through 2002. Under this grant, we are partially exempt from income, property and municipal taxes. For further information on U.S. taxation of Puerto Rican operations, see “Tax Legislation” in the Financial Review. Reconciliations of the U.S. statutory income tax rate to our effective tax rate follow: (percentages) 1997 1996 1995  U.S. statutory income tax rate 35.0 35.0 35.0  Effect of partially tax-exempt   operations in Puerto Rico (1.7) (3.5) (5.8)  Effect of foreign operations (4.2) (2.9) 1.6  All other — net (1.1) 2.4 1.3  Consolidated effective tax rate 28.0 31.0 32.1  Deferred taxes arise because of different treatment between financial statement accounting and tax accounting, known as “temporary differences.” We record the tax effect of these temporary differences as “deferred tax assets” (generally items that can be used as a tax deduction or credit in future periods) and “deferred tax liabilities” (generally items that we received a tax deduction for, but have not yet recorded in the Statement of Income). The tax effects of the major items recorded as deferred tax assets and liabilities are:   1997 1996 1995   Deferred Tax Deferred Tax Deferred Tax (millions of dollars) Assets Liabs. Assets Liabs. Assets Liabs.  Prepaid/deferred items $   259 $   214 $   242 $   156 $   236 $   193  Inventories 260 65 263 98 245 71  Property, plant and   equipment 31 368 32 414 43 372  Employee benefits 298 113 241 105 277 100  Restructurings and   special charge 133 — 157 — 215 —  Foreign tax credit   carryforwards 159 — 65 — 110 —  Other carryforwards 135 — 251 — 153 —  All other 120 92 106 87 106 61  Subtotal 1,395 852 1,357 860 1,385 797  Valuation allowance (27) — (28) — (30) —  Total deferred taxes $1,368 $   852 $1,329 $   860 $1,355 $   797  Net deferred tax asset $   516   $   469   $   558   These amounts, netted by taxing location, are in the following captions in the Balance Sheet: (millions of dollars) 1997 1996 1995  Prepaid expenses, taxes and other assets $ 442 $ 425 $ 469  Other assets, deferred taxes and   deferred charges 230 297 255  Deferred taxes on income (156) (253) (166)    Net deferred tax asset $ 516 $ 469 $ 558  A valuation allowance is recorded because some items recorded as foreign deferred tax assets may not be deductible or creditable. The “foreign tax credit carryforwards” were generated from dividends paid by subsidiaries to the parent company between 1993 and 1997. We can carry these credits forward to various dates through 2002 and use them in payment of certain U.S. tax liabilities. The Internal Revenue Service has completed its audits of our tax returns through 1992. In November 1994, Belgian tax authorities notified Pfizer Research and Development Company N.V./S.A. (PRDCO), an indirect, wholly owned subsidiary of our company, of a proposed adjustment to the taxable income of PRDCO for fiscal year 1992. The proposed adjustment arises from an assertion by the Belgian tax authorities of jurisdiction with respect to income resulting primarily from certain transfers of property by our non-Belgian subsidiaries to the Irish branch of PRDCO. In January 1995, PRDCO received an assessment from the tax authorities for additional taxes and interest of approximately $432 million and $97 million, respectively, relating to these matters. In January 1996, PRDCO received an assessment from the tax authorities, for fiscal year 1993, for additional taxes and interest of approximately $86 million and $18 million, respectively. The additional assessment arises from the same assertion by the Belgian tax authorities of jurisdiction with respect to all income of the Irish branch of PRDCO. Based upon the relevant facts regarding the Irish branch of PRDCO and the provisions of the Belgian tax laws and the written opinions of outside counsel, we believe that the assessments are without merit. We believe that our accrued tax liabilities are adequate for all years after 1992.

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