Much has been written on this. Some people are quite angry at the change, as they relied on visual colour to locate or identify their files. My view is this:
1. The bad news. Tags are not Labels. "Colouring-in" a file/folder is now not really possible. You should no longer expect to visually identify a file with the little colour dots.
2. The good news. Tags are incredibly useful at helping to sort and identify your files. But not by visually seeking them out. Use the OS to do the looking for you. With Smart Folders and Tags, you can organise, display and identify a whole bunch of files in many different ways, all at the same time.
If I have a file labelled "Camembert", then in a folder hiararchy, I can put it in Cheese > French > Soft.
But if I sort it this way, I can't have soft cheeses of different countries all in the same folder at once.
With Tags, I can have a Smart Folder show me all the soft cheeses, or all the French cheeses, or all the foods that I'm taking on the picnic. Or all the French soft cheeses that I'm taking on the picnic.
Your options are:
1. Use a third-party Finder replacement that includes colouring files.
2. Complain to Apple on their feedback pages, and hope that Apple change their mind.
3. Accept what can be done labels, and modify your workflow to be productive with that.