>>105065728I had a theory about this (although since the North and South water tribes clearly operate independently from each other they're already five nations).
Firstly, Kyoshi island was made independent by Avatar Kyoshi, I doubt it needed to kowtow to the Earth Kingdom for years (especially because their big boss was dead). Second, the war's been going on for over 100 years. I think the Earth Kingdom has more important things to do than exact tribute from the little town with the makeup girls that's cursed by a giant eel. If they even remember it exists, it's nothing like a priority, and the people who live there aren't about to embark on some kind of revolution when they're not being bothered.
It's a bit like the Two Rivers in Wheel of Time, if you've ever read that. The little-populated province might technically fall within the borders of a nation, but it hasn't been visited by a tax-man or a census taker in generations because there's nothing there the government thinks it needs. Nobody is even trying to conquer it, because it's so strategically worthless.
Or as the Chinese say, "The mountains are high, and the Emperor is far away."
