Posts -> Categories
In this page check the bottom of the page and click the link "category to tag converter"
Now in this page you can convert the categories to tags.
Also to convert Tags to categories you can go to Posts -> Tags, and in the smilar manner, click "tag to category converter" and do the reverse
Note: At the time of this post, the links are pointing wrongly to the blog import page, i am reporting this to the support. Also if some moderator looks a this post, please check the link of the tags to category and category to tag links, they are wrongly pointed to the blog import page.