With the caveat that I don't have access to the new Planescape quite yet (pre-ordered, but not early access pre-ordered), the Fated aren't Sigil's IRS, they're old-school tax collectors. It's a small, but important difference.
They're not impersonal bureaucrats you routinely send a packet of paperwork and a check to annually, they're thugs that knock on your door, tell you that you owe X gp in taxes, and compel you to pay up with threats of repossessing your property (land is very much at a premium in Sigil) and/or having you arrested for tax evasion (and back in 2e, the Mercykillers had "streamlined" all criminal sentences down to either a decade of hard labor or execution, so that's hardly an idle threat).
Their control over the Hall of Records means that they control (and charge for) access to what would otherwise be public records and information. The deed that says you own the land you own? On file in the Hall of Records. The tax records showing that you've paid what you owe on time and in full? In the Hall of Records. The people who can "find" documents showing that you owe back taxes and/or don't actually own the property you're living/working in? In the Hall of Records.
The aftermath chapter of Faction War even suggests that nearly all of the tax revenue the Fated collects is eaten up by their administrative overhead and consequently siphoned off into the Faction's coffers, with little to none of it actually being used for the betterment of the city.
It's a formalized protection racket operating under the guise of tax collection. The Fated take what they think they can get away with.