In CA if you go through the Initiative process and get enough Signatures of registered Voters you can get items put on the Ballot of the next Election.

A "Snack Food" Sales Tax was gotten rid of that way.

Concerning the under reporting of the Sales price on Private sold Vehicles; the State could perhaps require that Vehicles sales price to be advertised in some printed Media and regardless of what the Vehicle was actually sold for the advertised price would be used for Sales Tax purposes.
I think that would be closer to being fair as it is unlikely that someone is going to show up and pay more than the advertised price for a Vehicle.
(Since the present Vehicle Sales Tax system seems like it is unfair and unpopular might get some new Politician running for office interested in the above idea.)

I sold a car to the son of a friend of mine. I would have loaned it but decided that I didn't want the liability of him driving my stuff. Parents were good enough friends to make we want to help. There wouldn't be an advertised price in those cases. Sometimes the gain from tax collection isn't worth the pain imposed.

Unfortunately, it is easier for politicians to "get the scoff laws" as a revenue increasing technique than to admit they are really in favor of and actually raising taxes. Most of these back door (end) tax increases are very inefficient. One need only look at the legal system with its petty crime enforcement, traffic court & red light cameras for confirmation.

I am sure there is equally plenty of dealers talking up the price of cars to keep the market up.
Few are sold for the asking price.
Over here you see it on ebay all the time. A car starts with a very high starting bid, gets no bids. Comes back on with a starting price about 50% of the previous. If its lucky it gets 1 bid. Otherwise it becomes buy it now or best offer. Sells for less than 1/2 of original starting price. Completed listings is a great part of an ebay search.
The same thing happens in real estate.
Most sales is a case of "the emperor in his new clothes".
I am sure the dealers on your side of the pond are no different to here (sorry Tyler, not you, a generalization!).

Hey!
 

Don't give our government any new Ideas on how to expand their power. Everything they try to "FIX," makes things worse. ;)

Here in Washington they use a different price guide for older cars. I don't remember what it was called but it wasn't the NADA. Unlike the NADA guide it had different price points depending on condition, all the way down to drivable parts cars. Based on that, a bill of sale, and a seller's statement of condition I once successfully got them to accept a $200 sale price for a '72 Saab.

When I lived in Michigan people used to falsify the prices on title transfers all the time to save on use tax; it was common practice for the seller to leave it blank so the buyer could decide how much of a risk taker they were. There were some $2 cars out there. ;) Given that, I can understand why they'd want to compare to some kind of guide.

North of the border, my province uses a VERY inflated book price, and will not accept the price on a bill of sale, but they will accept an appraisal (by a licensed appraiser, of course), but, then, if the bill of sale is higher than the appraisal, guess which price is used to determine tax?
If your vehicle is older than their book, you HAVE to have an appraisal.

The only break they will give you is seasonal plates, at a slightly reduced rate. Antique plates are available, but that only legally allows driving to a show, a parade, or to be inspected.

In Nevada they charge some extra registration fees that amount to a property tax on your vehicle. In addition to the basic registration fee of $33 for cars and $39 for motorcycles (the other six bucks goes to fund motorcycle safety programs), and $28.25 for the title if it's the initial registration, you also pay a "government services tax" of four percent on the depreciated value of your vehicle, plus an additional "supplemental government services tax" of one percent. Now to get the depreciated value of your vehicle, start with the original MSRP. Now multiply by .35 to get the DMV valuation of your vehicle when new. For each year old it is, subtract five percent of that value, down to a minimum depreciated value of 15% of the original DMV valuation. Clear as mud?