Abstract
<jats:p>The article substantiates a territorially-oriented mechanism for financing innovation activity based on targeted deductions of enterprises from the corporate profit tax. The relevance of the study stems from the high territorial concentration of the innovation potential of the Republic of Uzbekistan in the capital region against the background of low innovation activity of enterprises in the regions. The author proposes the formation of local territorial innovation funds at the district level through the redistribution of 1 % of the enterprises' profit tax without increasing the aggregate tax burden. Based on official statistics on 12,239 enterprises of the Syrdarya region, the potential volume of the funds is estimated by districts and economic sectors. The procedures of fund formation, governance and allocation are described; the model is compared with international analogues (Hungary, Brazil, the USA) and with the cluster model of innovation development; advantages, risks and ways to mitigate them are assessed</jats:p>