Using heirarchial tags or Custom taxonomies

I don’t know if there is a real difference between Categories and tags in terms of SEO.

I read in one place that Categories should be fewer and used to set the general structure of the site, while tags should be used to group posts that are in different categories but share a similar key word.

For example, a post in Pizza category and a post Vegetables category might refer to London city, so London city could be used as a Tag.

Expanding on that, I was thinking that having multiple taxonomies and making tags heirarchial might be more convinient for me and for google.

Therefore, I can use Custom taxonomies plugin/codes to add more taxonomy groups and with heirarchy (cities in one group, hotels in another, etc), so as to index my posts exhaustively and in a heirarchial structure and convinient for referencing.

Is there any SEO side effect to this idea of multiple taxonomy structures?

Thanks.

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