Tags are good in conjunction with folders, because they provide another way to search when you forget where a file is, and you don't remember the file name. But folders are really good at collecting files with a similar purpose together. Does a good tagging system have a notion of a "collection" or something, instead of just categories and tags. If so, it just seems like folders by a different name. Moving away from…
When it is needed, that file can also be 'added to' the 'folders' "Teams"->"Alpha" and "Clients"->"XYZ Corp".
So, sort of like folders by a different name. But more like folders++. With complexity hidden until desired.
How files are physically stored is neither here nor there.