Teflon white paste is best, but tape can be used if applied correctly. The problem with tape is when you take the joint apart. Little pieces of the tape stay embedded in the female half of the joint and if not completely removed, could cause some problems with small orifices. I don't know if there is anything that small in a tractor hydraulic system but its better to be safe than sorry.
If you do have to use tape and ever have to take the joint apart, just remember to clean both male and female thread vigorously to remove all of the small tape particles.
I have a can of white Teflon paste that is oil based that I have been using for 40 years. I have to add a bit of motor oil occasionally to loosen it up but it works great on threads, only takes a dab.