Background Alcohol is an important risk factor for road transport injuries. We aimed to determine if raising alcohol taxes would be a cost-effective intervention strategy for reducing this burden.

Methods We modelled the effect of a one-off increase in alcohol excise tax (NZ$0.15 (US$0.10)/standard drink) on alcohol consumption in New Zealand, using price elasticities to determine change in on-trade and off-trade sales of beer, cider, wine, spirits and ready-to-drink products. We simulated change in alcohol-attributable motor vehicle and motorcycle injuries, by age, sex and ethnicity, over the lifetime of the current population, and from changes in injuries, we determined changes in costs of health care, productivity, crime and vehicle damage.

Results The modelled increase in tax led to a net 4.3% reduction in pure alcohol consumption and a 27% increase in excise tax revenue. Lifetime population health improved by 640 quality-adjusted life years (95% uncertainty interval: 450 to 860) and costs of treating transport injuries reduced by NZ$3.6 million ($0.88 million to $6.8 million), although this was countered by a $3.8 million ($2.9 million to $4.8 million) increase in costs of treating other diseases. Health care costs were far outweighed by a $240 million ($130 to $370 million) reduction in lost productivity, crime and vehicle damage costs. Cost-effectiveness was not highly sensitive to price elasticity values, discount rates or time horizons for measurement of outcomes.

Conclusion Raising alcohol excise tax in this high-income country would be highly cost-effective and could lead to substantial cost-savings for society.