If Liechtenstein is too big for you, welcome to Monaco. For reasons that probably surprise even the 7000 Monegasques, Monaco has survived as a relic from the age of city states, the only remaining soverign city-state in Europe, and (together with Singapore) only one of two remaining in the world.
Monaco muddled along economically for centuries, making deals with France and various Italian states to maintain its soverignity, until it hit upon the idea of being a casino holiday resort / tax haven. The casino was opened in 1856, but didn't really take off until the owners petitioned to change the name of the quarter away from "Les Spelegures" (Den of Thieves). They made a convincing argument to Prince Charles that it should be renamed "Monte Carlo" in his honour, and naturally he agreed. One condition, however, was that citizens of Monaco were not allowed to gamble in the casino, which even now only sucks money from rich foreigners. We didn't go and gamble in the casino, but being charged €16 for a small beer and a hot chocolate made us feel like "Den of Thieves" would be a more honest name.
The massive earnings of the Casino is the main reason why Monaco can afford to have no income tax. This in turn allows it to be a tax haven for the obscenely rich, adding to the glamour and image of decadent Monaco. So many millionaires want to live in the tiny nation that the city is almost one solid building, with the roofs of hotels being used as parks and railways being diverted underground. The real estate business is so lucrative here that the average apartment price in the country is €55,000 per square metre!
It is not completely correct though to say that Monaco has no income tax. More precisely, there are no taxes on rich useless people with vast amounts of inherited wealth (for example, the royal family of Monaco). People who actually have jobs still have to pay an employee tax, so the only untaxed are the unemployed ultra-rich of Monaco. We will have to assume that it is pure chance that Monaco and Liechtenstein, still ruled by mega-wealthy royal families with enormous political power, have tax codes that do not take a cent away from mega-wealthy families...
The combination of tourist mecca and tax haven produces some odd demographics in tiny Monaco. Monegasques are the decided minority of residents, only ~20% of the population, and the resident and commuting French population are culturally dominant. Large families are essentially non-existant, with one of the lowest birth-rates in the world, leading to very few Monegasques children. On our meanders through this micronation we did find the two places where the 20 teenagers of Monaco hang out. Under the train station escalators we found the imitation American street gang, who wore hipster outfits and took turns breakdancing as the others kept their best masks of distain on their faces. And under the escalator by the harbour we found a cluster of pseudo-goths wearing leather jackets and hunched over their laptops, poaching free wifi from the casino next door.
In a sign of just how small Monaco is, when looking for an Indian resturant for dinner, Lydia found one but then said "oh, that restuarant is in France, we can't go there". Since it was only 400m away we crossed the international border on foot anyway. Finally, since I can't write a blog post without mentioning Hayden, here is a video of Hayden eating a pickle in Monaco: