The EU thought by introducing an import VAT they would get more money but the opposite is the case

Johnny Van Haeften, art dealer

That could mean millions of pounds being lost by British dealers.

The report comes at the launch of the Maastricht art fair in the Netherlands, one of the world's biggest festivals.

London art dealer Johnny Van Haeften warns that the current system is not working.

He told BBC Radio 4's Today programme: "The EU has shot itself in the foot."

He added: "At the moment VAT is levied on the profit margins on all works of art.

"If the market was free, they would be much more art circulating. The EU thought by introducing an import VAT they would get more money but the opposite is the case."

Unveiling

However the dispute is refusing to overshadow the arrival of a rare Rembrandt which is expected to fetch more than �30m at auction.

After a year of careful restoration work, his painting of the Goddess Minerva makes her debut at the art fair.

It was painted in 1635 and is regarded as one of Rembrandt's most important historical works.

The work was once owned by the Swedish inventor of the Electrolux vacuum cleaner and then by Baron Bich, the Bic ballpoint pen magnate.

New York art dealer Otto Naumann picked up the painting for �20m last year.

The EU say that the sale of the Rembrandt shows that the art market here is as buoyant as ever.

More than 200 dealers from 13 countries have been invited to the Dutch town for the fair, which ends on 17 March.