The country may not trust their citizens when it comes to paying taxes, but it's not an absolute lack of trust. They set up regulations outlining rules and punishments, back them with various enforcement mechanisms, and... they trust it's enough for vast majority of the citizens.
They trust most people will be nudged towards paying the right amount of taxes - that's why they don't generally surveil every single transaction you're making. It's hard for a regular person to get on the IRS radar in a way other than interacting with government services in a weird way somehow. When they notice something suspicious, they will follow up, but the process set in the aforementioned laws is again very much trust-based, giving the suspect the ability to explain themselves at various stages, and not digging through one's entire life until late in the process. It's based on a reasonable assumption that most of the issues a country's IRS would flag are honest mistakes.
Same with every other process in most (all?) societies. There are directions, nudges, deterrents. Not total surveillance. But the newest trends in technology businesses seem to desperately want to move us towards the latter.
For example, if you go to some big box store and forget to make you pay for something, I don't know many people who will point out the mistake and pay their due. The same people will probably be more inclined to do so if the shop in question is a small shop and they know the owner personally, even more so if he is an actual friend.
And the level of trust reflects that. Big box stores will monitor everything, because they know their customers can't be trusted, while friends will not even keep tabs. At the highest level, I don't know any country that trust their citizens when it comes to paying taxes, for good reason. There is an entire industry dedicated to more or less legal tax avoidance, opposed by an army of legislators and inspectors.
We have lost trust long ago. I'd say the turning point is the invention of the lock, thousands of years ago. I mean, isn't the lock and its information counterpart, cryptography, a symbol of distrust? For me, it is, but it is also what allows us to be secure among people we don't know.