Drugs in the research were ranked according to harm per user.
Nearly 390,000 Kiwis are illegal drug users - and if tax was paid on the associated trafficking, the Government would pull in at least $245 million a year.
The New Zealand Drug Harm Index has been updated for the first time since 2008 and has estimated the annual social cost of drug use at $33,800 a year per dependent user and $2300 per casual user.
The Ministry of Health-commissioned research draws on official information to provide insights into the world of illegal drugs, including how much tax traffickers would be paying, and the large profit margins criminals make. Drugs were ranked according to harm per user, using a survey of health experts and detailed information on health, enforcement and family and wider society costs.
Synthetic cannabis was found to be as harmful as cocaine and much worse than other drugs such as ecstasy, LSD and natural cannabis. Alcohol and tobacco were not included. Methamphetamine was ranked as the most harmful drug for dependent users - those whose drug use was weekly or more frequent, and that resulted in self-reported harms.
Health officials are reviewing how severely people are dealt with for possession of illegal drugs or drug utensils.
Associate Health Minister Peter Dunne said the drug harm index would help tailor policy, and he would present the results at the upcoming UN special session on drugs in New York in two weeks.
The Ministry of Health-commissioned drug index estimated that 388,000 Kiwis used illegal drugs - of which about 37 per cent were "polydrug" users, or those who used different illegal drugs. It was estimated that, in 2014, illicit drug use cost New Zealand $1.85 billion.
The total cost of personal harm to drug users was estimated at $601 million. Cannabinoids (both natural and synthetic) and amphetamine-type stimulants caused the most harm in total.
However, when looked at by individual, cannabinoids cause the least personal harm at $9900 each year per dependent user, compared to amphetamines at $184,200. The harm caused to communities (family and friends, organised crime and acquisitive crime) was put at $893 million, and the cost of enforcement and health interventions was $351 million.
Recent research undertaken for police suggests 56 per cent of the proceeds from drug trafficking is reinvested in criminal activity (mostly more drug trafficking, but also extortion, fraud, pornography and weapons trafficking), with the rest spent on lifestyle.
Police data indicates that drug revenue includes 83 per cent profit, with the remaining 17 per cent reimbursing the costs of running the business.
More than $70 million in funding for other criminal activity is provided by the sale of illegal drugs, with close to 90 per cent of that generated through the sale of cannabinoids.
"In general, the casual user does not face the range or intensity of harms endured by dependent users," the drug harm index report notes. "Nevertheless, the casual user makes a significant contribution to the expansion of criminal activity beyond drug trafficking and into other forms of crime."
More than $30 million from drug sales to casual users is then used to fund crime. Overall, $245 million is lost in taxes that would otherwise be paid on revenues and profits generated by illegal drug trafficking.
Estimated social cost of drug-related harms and intervention costs in 2014/15:
• Amphetamine-type stimulants: $364.2 million
• Cannabinoids: $1.282 billion
• Hallucinogenic and psychedelic: $22.3 million
• Opioid and sedative: $175.9 million
Source: Drug Harm Index 2016