Agree - its killed trade alright.
But to be fair to An Post, there's a shocking lack of understanding amongst UK sellers on what's required. Leaving aside the VAT for a minute - Royal Mail do nothing, absolutely nothing, to ensure the parcels they receive are correctly labelled. Then when they inevitably get stopped and returned to the sender because nobody can figure out if they're subject to duty, Royal Mail just shrug their shoulders and the retailer is none the wiser as to why.
Personally, I've stopped purchasing anything dispatched via Royal Mail until it gets its house in order on labelling. Delivery via DHL is more expensive, but at least they know how to label a parcel - and they make sure their customers do too. So while I'll end up getting charged Irish VAT (plus an admin fee) by DHL, I know the parcel will get through.