Taxes work because enough companies and individuals pay them voluntarily that the cheaters can be cross-checked into oblivion.

Taxes work because people like me - highly-paid middle-class employees - find them almost impossible to dodge. Everyone else is the fluff on the side - it's PAYE (pay-as-you-earn, where taxes are withheld from your earnings) employees who are the backbone of government revenue. And, increasingly, sales taxes. In both cases, the pressure point is businesses, of which there are far fewer than there are citizens.