Writing as a member of the Categorization Project, WikiTree envisages multiple category streams each in a specific language. Your example of separate categories for Carinthia, Austria and Kärnten, Österreich is a good one. The first in turn would be a subcategory of Austria in an English language category stream and the second a subcategory of Österreich in a German language category stream.
Because WikiTree is a volunteer operation, things happen when people need them to happen -- so the category structure will always reflect how much time and energy various people have been able to put in on it. The policies are intended to help not waste peoples' time doing things that others will later need to undo! But this means that in any given location you may find a category structure in one, two, or even three languages. The Indonesia Project has a category structure in both English and Indonesian and is looking to add relevant portions of it in Dutch over time.
Category structure for any given location should be in the language used there, or English, or preferably both. There is no reason you couldn't use other languages as well, but it would be hard to imagine someone spending the time -- for instance, setting up an Arabic or Chinese language category structure for Quebec. Who would set it up, and who would use it on profiles?
At present the policy is that a category should in one language only. One exception that I see and which makes sense to me is categories using Chinese or Japanese characters, or Arabic or Hindi script, followed by the word in English script. Most of us can find our way through categories in other languages, but for the large number of us who don't read other scripts, categories that are only in those scripts become impossible to either use or review.
The logic for always having an English structure, where possible, above and beyond the fact that a majority of WikiTree users are English speakers, is that English is the de facto international language of the world. Eventually we will have to sort out whether to use International English rather than American English, i.e. should it actually be "Categorisation" rather than "Categorization", but let's not cross that bridge for a while!