The purge method belongs to the XML::Twig object, not to the XML::Twig::Elt objects the tags produce. That is what the error message tells you.

You probably want the delete() method of XML::Twig::Elt. Trusting you have the arguments as you want them,

sub mysub {
    my ( $t, $tag) = @_;
    for ($tag->children) {
        $_->delete() for $_->children;
    }
    1;
}
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Note that the two $_ in the delete line are different. The one right of for belongs to the outer loop, the left to the inner. Somehow, it all works out ;-)