Artificially changing the point of sales for digital goods is a loophole. It used to be legal, no question, but there's no particular reason why sales for digital goods should be treated differently from sales of physical goods. That was clearly not intended.
It's also not only about cultural reasons: It's the size of the population that matters. Luxembourg has about 500k inhabitants. If they collect all sales digital good in the european union and charge a mere percent of vat on it, they'll increase their tax base significantly. In contrast, if Germany does so it has a more than two orders of magnitude less gain on that. That's why it pays of for Luxembourg, even if they damage the rest of the EU in the process. It's like Washington DC collecting all sales tax for digital goods in the US. Basically some small countries are freeloading at cost for the whole community. (See also the British Tax Havens, or Canal Islands)
