The fact that iTunes Europe is based in Luxembourg is irrelevant I'm afraid. The general rule for VAT on consumer purchases of goods and services is that they are taxed in the country in which they are bought. The UK app store prices include UK VAT.
So, given that 61.5p with VAT is approx. 74p, 69p isn't bad at all.
Isn't there a threshold (around £20) at which this kicks in for non-EU purchases? The Jersey mail order loophole?