Indeed, taxation today and historically is not based on mass surveillance and doesn't depend on mass surveillance.

If you're failing to pay taxes on any scale you're going to get caught by whistleblowers or by conspicuous visible purchases. Enforcement isn't 100%, of course, but it never is for any crime and it doesn't need to be.

Even if your effective tax rate is 50% evasion can only double your money at best, and you've only got taxes to pay if you've got a successful income stream-- it doesn't take much threat of imprisonment or large fines to keep someone with something to lose staying within the lines. You're already making good money (if you're not-- no taxes) so why risk your good situation for a small constant factor more?

Some amount of successful evasion simply means somewhat higher taxes for everyone else, and that is a reasonable compromise for not living in a panopticon-- particularly since no amount of surveillance can entirely prevent tax evasion.

To the extent that someone wants to engage in evasion they'd route around this surveillance system or not even worry about it: Data isn't intelligence, visible income can be offset by fake expenses (which are private in this system too!)-- and so it can't be said that this scheme's surveillance would even be particularly effective at blocking tax evasion. You'd be left with detecting it via traditional means, just as you already can even with completely private transactions, but without the privacy loss.

So it's a non-solution to a non-problem, that create significant privacy related collateral harm. It can do both because non-evaders won't bother to take the additional steps to protect themselves, and are exposed to every hack, leak, data-breach, change of policy, or abuse of lawful process.

(Analog: run strong encryption or strong encryption+steganography inside key-escrowed encryption. This possibility bounds the potential benefits of key escrow but fails to bound the harms.)

For any system one should imagine the abuse potential should the currently benign regime be replaced with a future genocidal one. Certainly Germans should be well acquainted with the value of that kind of reasoning-- it isn't like targeting sub-populations for asset seizure is a hypothetical threat. A key property of privacy loss is that it's forever: you might not mind a piece of exposure today but years from now it could turn fatal.

But even then I wouldn't complain about it except for the misleading presentation of it as a privacy system and the smearing of opponents as tax evaders.

It's simply a falsehood to claim people opposed to this are opposed to taxation. Personally, I find taxation to often be a superior choice to fund public infrastructure compared to the most obvious alternatives such as printing money or accumulating debt-- particularly because taxation is more visible and thus more accountable. But we must take great care to mitigate the potential collateral damage of taxation including accounting overhead, market distortion, and loss of privacy.

The false and defamatory characterization of opponents as tax protesters is part of why I feel comfortable saying that I believe the mischaracterization of the system as 'private' is an act of intentional fraud. An honest system doesn't need to discourage or suppress its critics by falsely accusing them of being in favor of crime or other anti-social conduct.