This is entirely reasonable. VAT is a tax on consumption, paid for by the consumer. Of course it should depend on where the consumer lives, not on where the business is based. The upshot is, of course, that if you want to be a "small business" that is also multinational, you cannot pretend that different countries don't have different laws.
Most people, on here as well as elsewhere, seem to think of the Internet, and all who sail in her, as being a separate entity, not subject to the laws of anywhere. But if I buy a printer from a company in France, whether I do it by phone or online is irrelevant. If I phoned them up I would be paying UK VAT, and why should online be any different?
Here's another way to think about it: when is the contract formed on a sale of a loaf of bread in Tesco? Not when I take it off the shelf: that's an invitation to treat. Not when it's rang up on the checkout: that's confirmation of the invitation. Not when the money is given over: that's an offer. The contract is formed when the goods are given to me, the acceptance of the offer.
This is important in the recent Amazon 1p case: the contract of sale is not formed until the customer has paid, AND the goods have been delivered to the customer. If the delivery driver gets a call at the end of your road to cancel the delivery, the contract has not been formed. Since VAT is applicable at the formation of contract, it is where the consumer has their goods delivered to that is the location for VAT. Amazon has been essentially committing fraud, and the rules have only been "changed" to clarify that Amazon (and others) are wrong.
All of this applies to digital delivery as well: the contract is only formed once the good has been downloaded onto the user's machine, and so VAT should be payable in the customer's location.
Edit: to clarify what others above have mentioned, Amazon will pay UK VAT on any deliveries to the UK, regardless of where they are from. See: