Using a CPAN module for parsing XML is a good idea.

XML::Simple is really simple to use. Just:

use XML::Simple;
use Data::Dumper;
my $xml_hashref = XMLin($file);
print Dumper $xml_hashref; #Just to see how it is structured
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Then, you can iterate over the hasref, and translate one space into no-space, and two spaces into one:

$xml_hashref->{tag1}->{nested_tag}{value} =~ s/\s//gs
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This node describes how to iterate hashrefs.