The price in the UK was very expensive compared to the USA and the 20% VAT (sales tax) was only part of the reason.
In nominal exchange rates the £999 price is $1,338 and at purchasing power parity exchange rates $1,513.
Take away the VAT and the price is £832 or at nominal exchange rates is $1,115 and purchasing power parity exchange rates $1,261.
Basically, the deeply disounted £699 retail price aligns to the US $999 price in states with no sales tax, though to Apple the pretax price is only $780.