A folder tree forces one answer to "where does this go". A car insurance policy is insurance, and the car, and 2024, and something you need when it is time to renew — and in a folder tree you have to pick one and then remember which one you picked.
With tags it can be all four, and any of them finds it. You are not filing the document any more, you are describing it.
Narrow down instead of hunting
Filters stack. Start with a tag, add another, put a search on top, and the list shrinks as you go. Because tag names count in search too, a plain search often puts you in the right neighbourhood before you filter at all.
Structure when you want it
Tags can sit inside each other, so "House" can hold "Insurance", "Repairs" and "Purchases" without losing the ability to see everything about the house at once. If you import an existing folder archive, your folders can become that structure directly.
The same on every device
Tags are part of the archive, not a local convenience. Tag something on the phone and it is tagged on the computer. Remove a tag and it is gone everywhere — it does not come back the next time an older device connects.